Review for ets exam…

TO BUYER:

• 
  Help buyers identify the product that they like/dislike.
  
• 
  Identify marketer
  
• 
  Helps reduce the time needed for purchase.
  
• 
  Helps buyers evaluate quality of products especially if unable to judge a products characteristics.
  
• 
  Helps reduce buyer’s perceived risk of purchase.
  
• 
  Buyer may derive a psychological reward from owning the brand, IE Rolex or Mercedes.
  

TO SELLER:

• 
  Differentiate product offering from competitors
  
• 
  Helps segment market by creating tailored images
  
• 
  Brand identifies the companies products making repeat purchases easier for customers
  
• 
  Reduce price comparisons
  
• 
  Brand helps firm introduce a new product that carries the name of one or more of its existing products...half as much as using a new brand, lower co. designs, advertising and promotional costs
  
• 
  Easier cooperation with intermediaries with well known brands
  
• 
  Facilitates promotional efforts
  
• 
  Helps foster brand loyalty helping to stabilize market share.
  
• 
  Firms may be able to charge a premium for the brand.
  

Brand Equity (Customer Equity)

Share of Mind, Attitudes = ImagePower. Landor Associates

Brand awareness:

1. 
   within relevant market(s)
   
2. 
   with influencers
   
3. 
   with entire market
   

Brand Name Decisions:

• 
  Individual Names: Procter and Gamble, Tide, Cheer, Bold
  
• 
  Family Names: GE, AT&T, and Sears
  
• 
  Trade name with individual product name: Kraft Products
  
• 
  MF Brand versus Private Brand?
  

Selecting a Brand Name

• 
  Easy for customers to say, spell and recall (inc. international ppl)
  
• 
  Indicate products major benefits
  
• 
  Should be distinctive
  
• 
  Compatible with all products in product line
  
• 
  Used and recognized in all types of media
  
• 
  Single and multiple words Bic, Dodge Grand Caravan, IBM PC (letters), or a combination Mazda RX7
  
• 
  Availability, already over 400 car "name plates", this makes it difficult to select a new one.
  
• 
  Use words of no meaning to avoid negative connotation, Kodak, Exxon
  
• 
  Can be created internally by the organization, or by a consultancy
  
• 
  Legal restrictions, i.e. Food products must adhere to the Nutrition Labeling and Education Act, 1990...May 8 1994
  
• 
  Global translations ?
  

1. 
   Features: tangible characteristics of product
   
2. 
   Functional Benefits: benefits to consumer for brand features
   
3. 
   Emotional Rewards: psychological or emotional benefits received by using brand's product?
   
4. 
   Values: what are the values of the typical loyal customer for this brand?
   
5. 
   Personality: what words would you use to describe brand if it were a person?
   

Discussion Topic: Investigate the above issues to determine who has rights to the use of a domain name.

Online brand investment versus offline brand investment

Discussion Topic: Discuss the challenges of branding on the web, how are Pampers developing a branding strategy?

Arthur Andersen changes name to Andersen
Accenture now a clear winner without Andersen name
Is there a window of confusion?
Andersen, Accenture

Discussion Topic: Discuss the evolution of the value of the brand: Andersen

Brand Licensing

Discussion Topic: Discuss the role the corporate logo plays in branding. Cite logos and their inherent value. Discuss logos which have changed, and why?

Packaging

Packaging Functions include:

• 
  Protect product and maintain functional form, IE milk.
  
• 
  Foil shop lifting
  
• 
  Offer convenience, Usage
  
• 
  Promote product by communicating features "last 5 seconds of mktg", Campbells red labels...
  
• 
  Develop reusable package for alternative use.
  
• 
  Segmentation, tailored to a specific group
  

• 
  Cost--how much are customers willing to pay for the packaging?
  
• 
  Preprinted cost, use UPC codes
  
• 
  Must comply with the FDA packaging regulations.
  
• 
  Make product tampering evident to the reseller and customer, cost benefit with liability
  
• 
  Need to consider consistency among package designs--Family packaging...category consistent...Pringles
  
• 
  Need to inform potential buyers of new products content, features, uses, advantages and hazards.
  
• 
  Need to create a desirable image through color etc. Can be designed to appear taller or shorter (thin vertical lines for taller) People associate specific colors with certain feelings, Red with fire. Do not package meet in green!!
  
• 
  Must meet the needs of resellers--transportation, storage and handling.
  
• 
  Environmental responsibility.
  

AOL Packaging

Labeling

Product Positioning and Product Repositioning

How new and current items in the product mix are perceived, in the minds of the consumer, therefore reemphasizing the importance of perception!!

New Product--need to communicate benefits
Established Products--need to reinforce benefits

Ideal Characteristics

Consumers desires refer to the attributes consumers would like the products to possess--IDEAL POINTS.

Each product must provide some unique combination of new features desired by the target market.

Instead of allowing the customer to position products independently, marketers try to influence and shape consumers concepts and perceptions.

Marketers can use perception maps.

Existing Products

^

|

Old Position | New Position

|

|

|

|

|

|

|

|

Traditional sun tan lotion positioned as aiding in getting a very glamorous deep tan etc.

• 
  Change Promotion: "Tan don't Burn" The St. Tropez Tan vs. Ultra Sweat Proof Serious tan for...Be Sun Smart
  
• 
  Change Product: Sunscreen and sunless tanning agent.
  

BMW positions on affordability

^

Very Safe

| Lexus/infiniti

| Mercedes

| BMW

|

|

|

Cheap--------------------------------------------------Expensive

|

|

|

|

|

|

|

Very Unsafe

BMW, to reposition up to the left
Due to the exchange rate, Lexus moves to the right

Why did they reposition?

Safety
Affordability
Competitors include Infiniti, Lexus, Mercedes Benz and Aurora

If you already have a brand in the market, must be sure to avoid cannibalization. Attributes and brand image should give a product distinct appeal.

New Product Positioning

When developing a new product, a company should identify all the features that are offered by all its major competitors.

Second, identify important features/benefits used in making purchase decisions.

Determine the overall ranking of features by importance and relate the importance of each feature to its "uniqueness": what are the unique selling points (USPs).

For example, you wouldn't buy a spreadsheet program that if it didn't perform basic math, so basic math is very important.

However since every spreadsheet has that it’s an "important fundamental feature", instead of an "important differentiating feature".

The other side would be a spreadsheet that displays all numbers in binary (0-1) instead of "normal" numbers (0-9). This is unique but not important.

The evaluation becomes a 2 x 2 matrix with uniqueness on the X-axis and importance on the Y-axis.

^

X Important to TM (Stockbroker) X

Math functions | Import Data

|

|

|

|

|

----------------------------------------------------------Unique

|

|

|

|

|

|

| X

Binary Data

If the feature is in the upper right hand corner then you probably have a winning feature (USP).

This is known as feature positioning, as opposed to product positioning. One can then see what type of customer needs the important (and perhaps unique) features.

If your spreadsheet accepts continuous data in real-time (such as stock market data) while Excel doesn't, you'd position your spreadsheet as a "real-time spreadsheet with all calculations needed by Wall Street."

Its a claim that tells something unique about your product, who it's for, and by implication, that Excel can't do it.

Product Life Cycle

Popularized by Theodore Levitt, 1965
PLC can be applied to:

• 
  product category (Watch)
  
• 
  product style (Digital)
  
• 
  a product item/brand (Timex)
  

Four Stages to the Product Life Cycle:

1. 
   Introduction
   
2. 
   Growth
   
3. 
   Maturity
   
4. 
   Decline
   

The following material refers to the PLC as far as the product category is concerned unless otherwise stated.

Introduction

Failure rate for new products can range from 60%-90%, depending on the industry. A product does not have to be an entirely new product, can be a new model (car), a new product for the company, or repositioning a product to a new market.

Marketing Mix (MM) considerations

Need to build channels of distribution/selective distribution
Dealers offered promotional assistance to support the product...PUSH strategy.
Develop primary demand/pioneering information, communications should stress the benefits of the product to the consumer, as opposed to the brand name of the particular product, since there will be little competition at this stage and you need to educate consumers of the product's benefits.
Price skimming...set a high price in order to recover developmental costs as soon as possible.

Price penetration...set a low price in order to avoid encouraging competitors to enter the market, also helps increase demand and therefore allows the company to take advantage of economies of scale.

Growth

Need to encourage strong brand loyalty; competitors are entering the market place. Profits begin to decline late in the growth stage.
May need to pursue further segmentation.

MM considerations

May need to perform some type of product modification to correct weak or omitted attributes in the product.

Need to build brand loyalty (selective demand), communications should stress the brand of the product, since consumers are more aware of the products benefits and there is more competition, must differentiate your offering from your competitors.

May begin to move toward intensive distribution-the product is more accepted; therefore intermediaries are more inclined to risk accepting the product.

Price dealing/cutting or meeting competition, especially if previously adopted a price skimming strategy.

Maturity

Sales curve peaks-severe competition, consumers are now experienced specialists.

MM Considerations

A product may be rejuvenated through a change in the packaging, new models or aesthetic changes.
Advertising focuses on differentiating a brand, sales promotion aimed at customer (PULL) and reseller (PUSH).
Move to more intense distribution
Price dealing/cutting or meeting competition
Provides company with a large, loyal group of stable customers. Generally cash cows that can support other products.
Strategies during maturity include:

• 
  Modification of product...use line extensions
  
• 
  Reposition Product
  

Weaker competition will have left the market place.

Decline

Sales fall off rapidly. Can be caused by new technology or a social trend.
Can justify continuing with the product as long as it contributes to profits or enhances the effectiveness of the product mix.
Need to decide to eliminate or reposition to extend its life.

MM Considerations

Some competition drop out
Need to time and execute properly the introduction, alteration and termination of a product.
Cannibalization strategies to introduce new products.

Need to manage product mix through their respective life-cycles. When to decide to introduce new (modified) products that compete with the current product offering.

With high-tech products, need to consider introducing new (and competing) products as the existing product is still in the growth stage of its life cycle.

Different types of Life Cycle Curves

• 
  Fad Curve
  Fleeting fashions vs. lasting shifts in consumer preference. Cannot differentiate between the two using usual marketing tools like focus groups.
  "Hand anyone a hula hoop, and they'll have fun with it--at first"
  
• 
  Seasonal Curve
  Life cycles that vary by season, clothing etc.
  

Developing and Managing Products

To compete effectively and achieve goals of an organization, the organization must be able to adjust its product mix.

Need to understand competition and customer attitudes and preferences.

Timex Turns down the Swatch

1982, Timex turned down the opportunity to market "Swatches".
Timex was resting on its laurels, simple low cost watches.
Digital revolutionized industry technological change, Timex stuck with analog.

DID NOT KEEP UP WITH WATCHES EVOLUTION FROM A FUNCTIONAL OBJECT TO A FASHION ACCESSORY.

Now consumer owns 5 watches up from 1.5 30 years ago (emphasizing fashion need). Timex has acquired Guess and Monet Jewellers (distribution outlets) in an effort respond to change.

Product mix:
Dressy watches to Walt Disney Character watches, Indigo. Now have 1,500 styles, 300 in 1970.

Developing New Products

Need to develop new products. A new product can be:

• 
  Continuous Innovation...No new buyer behavior to learn, i.e. -products not previously marketed by the firm, but by others
  
• 
  Dynamic Continuous Innovation...minor education needed for consumers to adopt product
  
• 
  Discontinuous Innovation...entirely new consumption patterns
  

DVD Standard

DVD Association

Discussion Topic: Discuss the evolution of the DVD standard and its importance in new product development.

For a new product to succeed it must have:

• 
  desirable attributes
  
• 
  be unique
  
• 
  have its features communicated to the consumer (mkt support necessary)
  

Developing new products is expensive and risky.
Failure not to introduce new products is also risky. IE Timex above

Firms develop new products in three ways:

• 
  By acquisition, i.e. Timex bought Guess and Monet Jewellers in 1992, bringing in new products to their product mix.
  
• 
  Acquiring patents, licensing technology
  
• 
  Internal development, this is what we are going to focus on.
  

About 20K new products a year launched: about 75% are brand extensions.

Why New Products Fail

• 
  Lack of differentiating advantage
  
• 
  Poor marketing plan
  
• 
  Poor timing
  
• 
  Target market too small
  
• 
  Poor product quality
  
• 
  No access to market
  

Seven phases to new product development:

1. 
   New Product Strategy Development
   Only a few ideas are good enough to reach commercialization. Ideas can be generated by chance, or by systematic approach and by company culture (3M). Need a purposeful, focused effort to identify new ways to serve a market. New opportunities appear from the changes in the environment.
   
2. 
   Idea Generation
   Continuous systematic search for new product opportunities.
   
   • 
     Marketing oriented sources--identify opportunities based on consumer needs, lab research is directed to satisfy that research. 1-800#s, research etc.
     
   • 
     Laboratory oriented sources--identify opportunities based on pure research or applied research.
     
   • 
     Intrafirm devises--brain storming, incentives and rewards for ideas. 3Ms Post it, from choir practice. Hewlett Parkards lab is open 24 hrs. day. Analyzing existing products, reading trade publications.
     

Brainstorming for your group project. Ideas should not be criticized, no matter how off-beat they are.

3. 
   Product Screening and Evaluation
   New product check list; list new product attributes considered most important and compare each with these attributes. Check list is standardized and allows ideas to be compared.
   --General characteristics, Marketing Characteristics and Production Characteristics.
   

Ideas with the greatest potential are selected for further research.

Do they match the organizations goals (Some companies have many patents that they have not exploited for this very reason.)

Look at companies’ ability to produce and market the product.

Need to look at the nature and wants of the buyers and possible environmental changes.

Concept Testing
Sample of potential buyers is presented with the product idea through a written or oral description to determine the attitudes and initial buying intentions.

Conjoint Analysis to see feature tradeoffs.

This is done before investing considerable sums of money and resources in Research and Development.

Can better understand product attributes and the benefits customers feel are most important.

Would you buy the product?
Would you replace your current brand with the new product?
Would this product meet real needs?

4. 
   Business Analysis
   Analyze potential contribution to sales, costs and profits.
   

Does the product fit into the current product mix?
What kind of environmental and competitive changes can be anticipated?
How will these changes effect sales etc.?
Are the internal resources adequate?
Cost and time line of new facilities etc.?
Is financing available?
Synergies with distribution channel etc.
MIS to determine the market potential sales etc.
Patentability should be determined, last 17 years, 14 years for a pharmaceutical product.
Find out if it is technically feasible to produce the new product.
If you can produce the new product at a low enough cost so as to be able to make a profit.

5. 
   Product Development
   Develop a prototype, working model, lab test etc.
   

Attributes that consumers have identified that they want must be communicated through the design of the product.

6. 
   Test Marketing
   Can observe actual consumer behavior.
   Limited introduction in geographical areas chosen to represent intended market.
   Aim is to determine the reaction of probable buyers.
   It is the sample launch of the Marketing Mix.
   Determine to go ahead, modify product, modify marketing plan or drop the product.
   

PROS are:

• 
  Lessens the risk of product failure.
  
• 
  Reduces the risk of loss of credibility or undercutting a profitable product.
  
• 
  Can determine the weaknesses in the MM and make adjustments.
  
• 
  Can also vary parts of the MM during the test market.
  
• 
  Need to select the appropriate MM and check the validity.
  

CONS are:

• 
  Test market is expensive.
  
• 
  Firm's competitors may interfere.
  
• 
  Competitors may copy the product and rush it out. IE Clorox detergent with bleach P&G. "In a live test you've tipped your hand, and believe me, the competition is going to come after you. Unless you have patented chemistry, they can rip you off and beat you to a national launch" -Director of Marketing at Gillette's Personnel division.
  

Alternatively can use a simulated test market. Free samples offered in the mall, taken home and interviewed over the telephone later.

7. 
   Commercialization
   Corresponds to introduction stage of the Product Life Cycle.
   Plans for full-scale marketing and manufacturing must be refined and settled.
   Need to analyze the results of the test market to determine any changes in the marketing mix.
   Need to make decisions regarding warranties etc (reduces consumers risk). Warranties can offer a competitive advantage.
   

Spend alot of $s on advertising, personnel etc. Combined with capital expenditure makes commercialization very expensive.

Need to consider:

• 
  the speed of acceptance among consumers and channel members;
  
• 
  intensity of distribution,
  
• 
  production capabilities,
  
• 
  promotional capabilities,
  
• 
  prices,
  
• 
  competition,
  
• 
  time period to profitability and commercialization costs.
  

Buyers' Product Adoption Process

1. 
   Awareness
   Buyers become aware of the product
   
2. 
   Interest
   Buyers seek information and is receptive to learning about product
   
3. 
   Evaluation
   Buyers consider product benefits and determines whether to try it
   
4. 
   Trial
   Buyers examine, test or try the product to determine usefulness relative to needs
   
5. 
   Adoption
   Buyers purchase the product and can be expected to use it when the need for the general type of product arises.
   

Rate of adoption depends on consumer traits as well as the product and the firm's marketing efforts.

Diffusion Process

The manner in which different members of the target market often accept and purchase a product (go through the adoption process)

1. 
   Innovators
   Techno-savvies first customers to buy a product, 2.5 % of consumers
   
2. 
   Early Adopters
   Tend to be opinion leaders. Adopt new products but use discretion, 13.5%
   
3. 
   Early Majority
   34% of consumers, first part of the mass market to buy the product
   
4. 
   Late Majority
   Less cosmopolitan and responsive to change, 34%
   
5. 
   Laggards
   Price conscious, suspicious of change, 16%, do not adopt until the product has reached maturity.
   

Implications to marketers, company must promote product to create widespread awareness of existence and benefits.
Product and physical distribution must be linked to patterns of adoption and repeat purchase.

Discussion topic: Discuss the differences in the new product development process for digital goods versus tangible goods, consider intellectual property issues, standards issues etc?

Relevant Knowledge@Wharton Articles

Corporate Sponsorships of Stadiums and Other Institutions Don’t Always Pay Off
Switching names, effect of brand. Value to stadiums, value to customers?
How to Keep Others From Ripping Off Your Ideas
Poachers Are Out to Plunder Your Intellectual Property Can you Do Anything?

Intellectual Property: WIPO
Intellectual Property and the National Information Infrastructure

Link to discussion board

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Marketing Strategy: Key Concepts 6

Market Focus: Domestic versus International
Protectionism versus open markets?
Who's Standards to adopt, home country or host country?
Should company play by host rules or try to change them?
Unions, Environmentalists
GWB: Free Trade area EU to impose tariffs to protect steel market
Some risks include:

• 
  changing borders
  
• 
  unstable governments
  
• 
  foreign exchange issues (devaluations etc?)
  
• 
  technology pirating
  
• 
  adaption costs for product and communication strategy
  

Steps to consider:

• 
  determine the international market environment (economic, political, legal and cultural); international trade system
  
• 
  few versus many countries, percentage of sales
  
• 
  determine which market to enter, risk versus rate of return
  
• 
  how to enter the market? exporting, licensing, joint ventures and direct investment
  
• 
  adaption of 4 Ps?: Text Books!
  
• 
  organizational structure for international business?
  

Economist: March 2nd, 2002 :The Short Arm of the Law

Discussion Topic: Discuss the complications of removing bribery from international transactions. What are the outcomes for economies?

International marketing is not always about going overseas?
Las Vegas?

General International Links:

Babel Fish
US Depts. of Commerce International Trade Administration, Export-Import Bank of the United States, The Bureau of Export Administration

Links to Trade Alliances:

WTO / GATT, NAFTA, EU for the US, European Union Online

Links for Bribery Discussion:

OECD: Organisation for Economic Co-Operation and Development, Foreign Corrupt Practices Act, Transparency International, Shell: Management Primers

Services

All products include a service component.

• 
  Intangible (associate w/ tangible representation)
  
• 
  Inseparable (influence providers)
  
• 
  Perishable (influence demand)
  
• 
  Variable (standardization issues)
  

General Marketing Issues:

• 
  External Marketing
  
• 
  Internal Marketing
  
• 
  Interactive Marketing
  

3 additional Ps

• 
  People
  
• 
  Physical Evidence
  
• 
  Processes
  

Focus:

• 
  Search Qualities: Goods (clothing, jewelery)
  
• 
  Experience Qualities
  
• 
  Credence Qualities: Services (medical, auto repair, legal services)
  

Relevant Knowledge@Wharton Articles

Prescription Drug Coverage for Seniors Faces Uncertain Future
A Live Baby or Your Money Back
Poachers Are Out to Plunder Your Intellectual Property – Can You Do Anything?
Ethical Standards for Global Corporations?
Ethical Inspiration for Marketing Managers
A Search for Google’s Success Turns Up Two Words: Trust and Technology

Link to discussion board

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Marketing Strategy: Key Concepts 7

What is price?

Price is the value exchanged for the product.

• 
  Economic (inc. barter)
  
• 
  Freedom of Choice (lock-in, opportunity cost)
  
• 
  Privacy
  

Evolution of pricing mechanisms: Fixed versus variable:

• 
  Chapt. 2 Digital Darwinism.
  
• 
  Pioneer of fixed pricing: Aaron Montgomery Ward
  

Only element of the MM that is given in return

Importance of (the economic aspect of) Price to the Marketer

• 
  Often the only element the marketer can change quickly in response to demand shifts.
  
• 
  Relates directly to total revenue TR = Price * Qtty
  Profits = TR - TC
  -effects profit directly through price, and indirectly by effecting the qtty sold, and effects total costs through its impact on the qtty sold, (ie economies of scale)
  
• 
  Can use price symbolically, emphasize quality or bargain (signal value).
  
• 
  Deflationary pressures, consumers very price conscious.
  

Six step process:

1. 
   Establish marketing objectives
   
   • 
     survival (short term)
     
   • 
     profit max.
     
   • 
     revenue max. (yield management pricing; dynamic pricing)
     
   • 
     growth max. (penetration pricing ... "free")
     
   • 
     market skimming
     
   • 
     product-quality leadership (signaling effect?)
     
2. 
   Demand schedule: elastic versus inelastic demand issues (priceline)
   

Percent change in quantity demanded relative to the percent change in price.

% change in Qtty demanded

-------------------------
% change in price

We are now looking at the actual impact on demand as price varies. Elastic demand is more sensitive to price than inelastic demand.

Elastic demand, greater than1 (-1)
Inelastic demand, less than 1 (-1)
Unitary demand, equal to 1
Always take the absolute values

Inelastic Demand

$|*

| *

| *

| *

| *

|-----------Qtty

$

Elastic Demand

$|*

| *

| *

| *

| *

|-----------Qtty

$

TR = Price * Qtty

If demand is elastic then change in price causes an opposite change in the total revenue.
If demand is inelastic then change in price causes the same change in the total revenue.
The less elastic the demand, the more beneficial it is for the seller to increase price.

3. 
   Cost issues: different levels of product (learning curve issues), (dis)economies of scale, fixed/variable, breakeven issues, marginal analysis
   

Marginal Analysis:
What happens to the costs and revenues as production increases by one unit. This will determine at which point profit will be maximized. Need to distinguish between:
Fixed Costs
Average Fixed Costs, FC/units produced
Variable Costs (materials labor etc.)
Average Variable Cost, VC/Unit produced

Total Cost = (AFC+AVC)*QTTY

Marginal cost = the extra cost to the firm for producing one more unit.
Marginal revenue = the extra revenue with the sale of one additional unit.

MR - MC tells us if it is profitable to produce one more unit.

Profit maximization at MR = MC

To produce/sell more units than the point MR = MC the additional cost of producing one more unit is greater than the additional revenue from selling one more unit. At any point prior to MR = MC, MR will be greater than MC, therefore the additional revenue from selling one more unit will be greater than the additional cost of producing one more unit, therefore forgoing the opportunity to generate additional profits. Therefore MR = MC = Profit Maximization; assuming all products are sold.

Due to the environment, it is difficult to predict costs and revenues etc.
Cost structures can influence pricing objective: high low fixed variable make-up has significant impact on contribution margins.

4. 
   Competitors pricing
   
5. 
   Pricing method:
   
   • 
     Cost Plus:
     
     • 
       Guarantees contribution
       
     • 
       simple to calculate
       
     • 
       not optimal
       
   • 
     Competition
     
     • 
       par with market
       
     • 
       price war implications?
       
     • 
       not optimal
       
   • 
     Value
     
     • 
       optimal
       
     • 
       difficult to determine
       
6. 
   Final price selection: odd / even etc.
   

Financing issues.

Life-cycle Pricing issues. Especially w/ services, two tier pricing etc.

Price Segmentation/Discrimination: Varying prices due to market conditions, different consumers:

• 
  "cost to serve" are different
  
• 
  value of product are different
  
• 
  service demands differ
  

Methods of segmentation/discrimination:

• 
  Price negotiation (second hand car examples, online auctions)
  
• 
  Geography
  
• 
  Price and quantity discounts: seasonal discounts, trade discounts, trade-ins
  
• 
  Promotion pricing: loss leader (lock-in etc.), special event, rebates, low interest financing, warranties
  
• 
  Discriminatory pricing: customer segment pricing, product form pricing, time pricing
  
• 
  Product mix pricing: line pricing, optional feature, two part pricing, product bundling
  
• 
  Product bundling: office suite etc.
  

Price changing issues (reducing or increasing) also relevant for establishing a price, at above or below market:

• 
  Customer reactions
  
• 
  Competitor reactions
  
• 
  Collaborator reactions
  

Game theory implications of adopting prices in competitive markets.

Signal value of price changes to competitors and customers.

Price transparency issues for establishing and changing prices.

Dealing with competitor price changes.

Discussion Topic: What are the potential long run consequences of a price promotion designed to attract competitors customers?

Discussion Topic: Relate examples of products that are "free" ... and if they are free, what is the objective of the company?

Discussion Topic: Access E-bay and describe your experiences as a buyer / seller. What type of products would work well under a dynamic pricing model? Does the life cycle stage of a product impact its attractiveness for dynamic pricing?

Relevant Knowledge @ Wharton Articles

Will Consumers Be Willing to Pay for Their Formerly Free Lunch on the Internet?
Can Priceline Remain Profitable?
New Internet Pricing Models Bring Pain, and Fortune, to Retailers
Is the Price Right? Ask Jay Walker
How Store Location and Pricing Structure Affect Shopping Behavior

Link to discussion board

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Marketing Strategy: Key Concepts 8

Channel Selection Issues

Use intermediaries who perform functions more efficiently. Functions include:

• 
  information flow
  
• 
  promotion
  
• 
  negotiation
  
• 
  ordering
  
• 
  financing
  
• 
  risk taking
  
• 
  physical possession
  
• 
  payment and title
  

Two key issues to support intermediaries

• 
  Improve exchange efficiency (5 mf. and 5 customers = 25 transactions with no intermediary; 10 transactions with one intermediary)
  
• 
  specialize in functions listed above
  

Types of utility provided by intermediaries:

• 
  Time
  
• 
  Place
  
• 
  Possession
  
• 
  Form
  

Channel decisions include:

• 
  direct selling versus using 1 or 2 or more intermediaries
  Manufacturer -> Consumer
  Manufacturer -> Retailer -> Consumer
  Manufacturer -> Wholesaler -> Retailer -> Consumer
  Manufacturer -> Distributor -> Wholesaler -> Retailer -> Consumer
  Examples
  
• 
  analyze customers' desired service outputs (size, waiting time, spatial convenience, support etc.)
  
• 
  channel objectives and constraints (based on product characteristics, intermediaries, environment and competitors channels)
  
• 
  buyer behavior (consumer and channel)
  
• 
  buyer demographics
  
• 
  identify channel alternatives (exclusive (BMW) vs. selective (clothes lines) vs. intensive (orange juice))
  
• 
  competitors' channels
  
• 
  channel terms and responsibilities
  
• 
  Channel incentives (trade promotions etc.)
  
• 
  evaluate channel by economic, adaptive and control criteria
  

Direct to market =

• 
  Greater fixed cost
  
• 
  Greater effectiveness / control over contacts
  
• 
  Greater control over targeting
  

Indirect to market =

• 
  Greater variable cost
  
• 
  Less control / responsibility
  
• 
  Greater coverage
  
• 
  Knowledge of customer within channel
  

Issues in selecting channel partners:

• 
  What role do partner play?
  
• 
  What margin do we give?
  
• 
  Can / do they carry competing / complementary product, private labels
  
• 
  How do we incentivize
  
• 
  Do they pass on price cuts?
  
• 
  How do we control for cannibalization w/ other channels (direct)?
  

Lock-in to channel decisions

Channel decisions impact on other elements of the mix

Life cycle issues change channel strategy.
Early stage: Specialized channels
Growth stage: Alternative channels
Maturity stage: Mass channels
Early stage: high control, service and delivered price
Later stage: increasing conflict, range of providers, complexity of channel

Channel member relationships

Impact of trade promotions: distortion effects?
Zero sum Relationship w/ channel members?
Need to build symbiotic relationships with channel members.

Channel modification issues

Trends include vertical, horizontal and multi-channel conflict.

Internet has had significant impact re: building new channels and changing industries through disintermediation and information flow issues.

Legal and ethical issues:

• 
  Exclusive dealing
  
• 
  Exclusive territories
  
• 
  Tying agreements
  
• 
  Dealers' rights
  

Retailing

Retailing includes all interactions w/ final customer

• 
  Store retailing (specialty, department stores, supermarkets, convenience, superstores, discount stores, warehouse stores, hypermarkets and catalog showrooms)
  
• 
  Non-store retailing (direct selling, direct mail billing, catalogs, web, vending machines)
  
• 
  Retail organizations (corporate chains, voluntary chains / retailer cooperatives, consumer cooperatives, franchises, independents)
  

Retail life cycle
Wheel of retailing
Retail market planning:

• 
  target audiences
  
• 
  product: assortment and service
  
• 
  product: positioning (Kmart vs. Wal Mart and Target)
  
• 
  product: services and store atmospherics
  
• 
  product: symbiotic relationships
  
• 
  pricing
  
• 
  promotion
  
• 
  place
  

Retailing trends:

• 
  new forms
  
• 
  shortening life cycles
  
• 
  non store growth
  
• 
  intertype competition, polarity, category killers
  
• 
  one-stop shopping
  
• 
  global expansion
  
• 
  stores as meeting places
  

Wholesaling

Wholesaling includes all interactions w/ intermediaries buying for resale or business use.

Functions include:

• 
  selling and promotion
  
• 
  buying and assortment-building
  
• 
  bulk-breaking
  
• 
  warehousing
  
• 
  transporting
  
• 
  financing
  
• 
  risk bearing
  
• 
  supplying market information
  

Wholesalers comprise four groups:

• 
  merchant wholesalers (take possession, full service vs. limited service)
  
• 
  agents and brokers (do not take possession, paid commission)
  
• 
  manufacturers' and retailers' branches
  
• 
  miscellaneous wholesalers (e.g. agricultural, bulk chemicals)
  

Increasing importance of logistics, and providing a system-wide approach at reducing costs.

Logistics decisions:

• 
  order processing (shorten order to remittance cycle)
  
• 
  warehousing
  
• 
  inventory
  
• 
  transportation (rail, air, trucks, waterways, and pipelines)
  

Interesting sites:

• 
  Carmax.com for used cars
  
• 
  Amazon.com for used books
  
• 
  Napster and Gnutella for music
  

Discussion Topic: Impact of channel members creating a market for used product. Is this good or bad for the market, how does it impact the value of the new product?

Relevant Knowledge @ Wharton Articles

Kmart’s 20-Year Identity Crisis
Taking Stock of Supermarket Retail Performance
Pay-for-Performance Trade Promotions Can Ease Friction Between Manufacturers and Retailers
Christmas E-tailers: Will It Be Ho-Ho or So-So?
Making the Case for Outside Sales Reps
How Store Location and Pricing Structure Affect Shopping Behavior
Add relevant websites
Link to discussion board
Return to Syllabus

Marketing Strategy: Key Concepts 9

Direct and Online Marketing

An interactive system that creates a measurable response (variable cost versus fixed cost of marketing) and / or transaction.
Goal to develop relationships with customers.
Rapid growth rate.

• 
  catalog and direct mail sales growing about 7% annually (retail sales @ 3%)
  
• 
  internet growth rates (Cyberatlas is a great resource for the number)
  

Growth due to innovations in:

• 
  technology: databases (data mining and warehouses) / communication systems
  
• 
  toll-free telephone services
  
• 
  payment systems (credit cards and smart cards)
  

Provides continuity, better timing, testability and privacy. Can benefit both customers and business with highly targeted and efficient exchanges.

Database marketing to support direct marketing. Companies can use their databases to:

• 
  identify prospects
  
• 
  differentiate offers
  
• 
  cross sell products
  
• 
  build loyalty
  
• 
  reactivate customer purchases
  

Issues with direct marketing include:

1. 
   annoyance
   
2. 
   deception and fraud
   
3. 
   privacy
   

Major direct marketing channels:

• 
  Face-to-Face
  
• 
  Direct Mail (inc. voice-mail and e-mail, bills, fax)
  
• 
  Catalog Marketing (inc. CDs)
  
• 
  Telemarketing (use of computers / cell phones (contextual marketing)
  
• 
  TV (direct response advertising / infomercials / shopping channels)
  
• 
  Kiosks (and vending machines)
  
• 
  Online (permission based marketing)
  

Online marketing is the most recent evolution of direct marketing. This can create channel conflict.

E-Commerce Marketing

• 
  Session 1: Introduction
  
• 
  Session 2: Aspect of WWW as a Medium
  
• 
  Session 3: Markets and Pricing Models and Digital Economics
  
• 
  Session 4: Advertising
  
• 
  Session 5: E-tailing
  
• 
  Session 6: Integrated Marketing and Communications
  

Direct Marketing Association

Add relevant websites

Relevant Knowledge @ Wharton Articles

Will Consumers Be Willing to Pay for Their Formerly Free Lunch on the Internet?
The Cell Phone as Marketing Tool: Will Consumers Answer the Call?
Clicking With Customers: New Challenges in Online Conversion
Why Job Searching is the Second Most Popular Activity on the Internet
Are There Lessons to Be Learned from Internet Porn Sites?
New Internet Pricing Models Bring Pain, and Fortune, to Retailers
Three Marketing Lessons from the Love Bug
How Companies Sponsor, Listen in and Learn From Chat Rooms
Is Your Website Working Well for You? Check its e-Performance
How to Keep Customers In Line for Your On-line Business
Hit and Miss: Why High Traffic Streams Need not Lead to More Online Business
Stephen King’s Novel Idea: Will It Change the Publishing Industry?
Christmas E-tailers: Will It Be Ho-Ho or So-So?
A Search for Google’s Success Turns Up Two Words: Trust and Technology

Link to discussion board

Return to Syllabus

Marketing Strategy: Key Concepts 10

got milk?

Definition:

To communicate with individuals, groups or organizations to directly or indirectly facilitate exchanges by informing and persuading one or more audiences to accept an organization's products.

-Companies must communicate with their customers, this communication should not be left to chance.

Design communication to your specific target audience:

• 
  Target Market
  
• 
  Part of Target Market
  
• 
  Different stakeholders of your organization.
  

Promotion: Fourth element of the marketing mix. Need to make sure the goals of promotion are integrated with other Ps.

Need to design a communications strategy, that integrates the promotion mix:

• 
  advertising: paid form of non personal communication about an organization or its products that is transmitted to a target audience through a medium: US: 1990, $138 b, 2000 $320 b (approx), worldwide, $780 b. In US, 25% promotional budget
  
• 
  sales promotion: materials that act as a direct inducement, offering adding value, or incentive for the product, to resellers, sales people or consumers: trade promotions = 47% of promotional budget, consumer promotions = 28%
  
• 
  public relations / publicity: news story form about an organization or its products or both, through a medium at no charge
  
• 
  personal selling: personal communication in an exchange situation
  
• 
  direct marketing
  

Increasing importance of Integrated Marketing Communications ... Why?

The fourth P the critical P?

Communications process consists of:

1. 
   sender
   
2. 
   encoding
   
3. 
   message
   
4. 
   media
   
5. 
   decoding
   
6. 
   receiver
   
7. 
   response
   
8. 
   feedback
   
9. 
   noise
   

Need to identify and understand the target audience, from the perspective of information processing:

1. 
   selective attention
   
2. 
   distortion
   
3. 
   recall
   
4. 
   contextual issues
   

Steps of the promotional program:

1. 
   Identify target audience and characteristics, and perception of product, context etc.
   
2. 
   Define communications objectives (not aware, awareness, interest, evaluation, trial, adoption). Seeking cognitive, affective or behavioral response
   
3. 
   message:
   
   1. 
      content (rational / emotional / moral)
      
   2. 
      structure (one or two sided)
      
   3. 
      format (headline, copy, sound)
      
   4. 
      source (trusted / likable / expert)
      
4. 
   select media (communications channels)
   
5. 
   establish budget (affordable / % sales / competitive / objective and task)
   

Consider:

• 
  push versus pull
  
• 
  stage of purchase process
  
• 
  stage of product life cycle
  
• 
  product complexity and risk
  
• 
  market position
  

Advertising

Need to consider the following issues when considering whether to advertise:

• 
  Does the product possess unique, important features to focus on Unique Selling Point (USP)
  
• 
  Are the hidden qualities important to the buyers
  
• 
  Is the general demand trend for the product adequate
  
• 
  Is the market potential for the product adequate
  
• 
  Is the competitive environment favorable
  
• 
  Is the organization able and willing to spend the required money to launch an advertising campaign
  

Issues to consider for advertisers:

• 
  Reach: national, regional, local
  
• 
  audience: industrial, consumer
  
• 
  product: product, brand, institution
  
• 
  objectives: awareness, interest, evaluation, trial, adoption (inform, persuade or remind)
  

Decision making for advertising:

1. 
   objectives setting
   
2. 
   budget decision (stage in product life cycle, market share, competition and clutter, needed frequency, product substitutability)
   
3. 
   message decision
   
   • 
     message generation
     
   • 
     message evaluation and selection ... USP ?
     
   • 
     message execution: structure depending on media (print: headline, illustrations, sub headline, body copy, signature)
     defined objective, defined product positioning, build product differentiation, consistent through campaign, strong integration, appropriate target market, simple product centered message, positioning of brand name within message
     
   • 
     social responsibility issues ... a wider context of evaluation
     
4. 
   media decision
   
   • 
     reach (# of ppl exposed at least once), frequency (total number of times reached) and impact (quality of impact)
     
   • 
     media types (TV (22%), Newspaper (23%), Direct Mail (20%), Outdoor, Magazines (6%), Radio (7%), WWW)
     
   • 
     Media Vehicles (programs, WSJ, Yahoo, Vogue): cpm relevant market etc.
     
   • 
     media timing
     
   • 
     geographic allocation: national versus spot buying
     
5. 
   ad effectiveness evaluation
   

Useful advertising links: adforum, Advertising Age, tbwa/chiat/day, Fallon, Organic, Mad Dogs and Englishmen

After reviewing NetRatings, discuss the state of advertising on the web.

Sales Promotion

Shorter-term tools to stimulate demand (consumer, trade and orgs. sales force.)

Potential impact on brand and shift demand?

Sales Promotion spend exceeds advertising spend and is growing faster ... why?

Consumer promotional tools include:

• 
  samples
  
• 
  Coupons (redemption rates ?)
  
• 
  rebates
  
• 
  cash refunds
  
• 
  product warranties (high risk items)
  
• 
  premiums (McDonalds)
  
• 
  prizes
  
• 
  frequent user programs
  
• 
  free trials
  
• 
  point of purchase displays
  

Discussion Topic: Take a look at Sweepstakesbuilder: What roles does a service like this provide for web-sites? Why would web-sites participate?

Trade promotional tools include:

• 
  reduced price
  
• 
  advertising support
  
• 
  free goods
  
• 
  push money
  

Public Relations

Can build awareness and preference in the marketplace, repositioning products, and defending them.

Tools include:

• 
  news
  
• 
  speeches
  
• 
  events
  
• 
  public service activities
  

Proactive versus reactive approach?

Media relations

Dealing with bad publicity?

Sales

Need to determine salesforce:

• 
  objectives; prospecting, communicating, selling, servicing, information gathering
  
• 
  strategies: solo, team
  
• 
  structure: territory (size / shape), product, customer
  
• 
  size
  
• 
  compensation: salary, commission, bonus, expenses
  

Personal selling includes:

1. 
   prospecting and qualifying
   
2. 
   preapproach: learn about prospect
   
3. 
   approach: greeting
   
4. 
   presentation: tell the story
   
5. 
   overcoming objections
   
6. 
   closing
   
7. 
   follow-up and maintenance
   

Importance of negotiations

Standards versus flexibility

Relationship management versus single transaction

Technologies impact on selling? (Knowledge of customer / CRM / flexibility)

Relevant Knowledge @ Wharton Articles

Corporate Sponsorships of Stadiums and Other Institutions Don’t Always Pay Off
Do Mixed Emotions and Advertising Mix?
The Cell Phone as Marketing Tool: Will Consumers Answer the Call?
How and When Advertising Works
Technology is Changing the Advertising Business
Pay-for-Performance Trade Promotions Can Ease Friction Between Manufacturers and Retailers

Link to discussion board

Return to Syllabus

­­­­­­­­­­­­­­­­­­­­­­­­­­­­­

Social Marketing Social marketing is the planning and implementation of programs designed to bring about social change using concepts from commercial marketing. Among the important marketing concepts are: The ultimate objective of marketing is to influence action; Action is undertaken whenever target audiences believe that the benefits they receive will be greater than the costs they incur; Programs to influence action will be more effective if they are based on an understanding of the target audience's own perceptions of the proposed exchange; Target audiences are seldom uniform in their perceptions and/or likely responses to marketing efforts and so should be partitioned into segments; Marketing efforts must incorporate all of the "4 Ps," i.e.: Create an enticing "Product" (i.e., the package of benefits associated with the desired action); Minimize the "Price" the target audience believes it must pay in the exchange; Make the exchange and its opportunities available in "Places" that reach the audience and fit its lifestyles; Promote the exchange opportunity with creativity and through channels and tactics that maximize desired responses; Recommended behaviors always have competition which must be understood and addressed; The marketplace is constantly changing and so program effects must be regularly monitored and management must be prepared to rapidly alter strategies and tactics. These key concepts can be abbreviated as follows: Action is the objective The target audience is the focus The exchange is critical Segment markets Use all four Ps Analyze and beware of competition Monitor and be flexible

Directory: students
students -> A chronology 1660-1832 The Restoration Settlement
students -> Introduction
students -> Storm Surge: a rising Danger
students -> Dr. Jeff Masters' WunderBlog
students -> April 9, 2008 Hurricanes (Continued)
students -> Instructions for Writing Hurricane Term Paper
students -> Rationale: why are we interested in Atmospheric Science?
students -> Atmo 336 – Section 001 Name
students -> Instructions for Writing Cap and Trade Term Paper
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